Gnamma #80 - A Step Towards A Conservation Ethic? A Perspective on Wetland Mitigation Banking

As I discussed in my previous newsletter, the process of developing markets tied to ecosystem services is tough. It's nuanced environmental science with tricky life-cycle assessment, then coupled with increasingly sophisticated financial services. If you couldn't already tell from the tone of the last piece, I'm unsure of the accuracy and precision of the quantification of environmental services. I believe that we may press up against epistemic limits (in the words of Morgan Robertson) of the knowability of some environmental parameters, especially coarse, clunky ones like "biodiversity." We are also likely to run over thresholds of diminishing returns when it comes to the technical effort required to accurately calculate various metrics. Within the same logic, increasingly sophisticated remote sensing technologies allow us to grasp more and more of how a landscape works with less field work (which is more labor intensive), but remote sensing still requires field validation; I believe really in-depth environmental metrics assessment might be better left to scientists who are not motivated by making their money back. The problem with uncertainty in environmental metrics for ecosystem service markets arises because of the linkage between the metrics and financial instruments. If the metrics are too loose, the financial instruments are effectively decoupled from environmental processes and no longer help; if they're too tight, the natural heterogeneity and variation in environmental systems may appear too volatile or low-ROI (after lots of expensive field work) in the eyes of financial investors. 

So in the context of the marketplace, even contemporary higher standards for offsets struggle to compete against the deluge of low-cost junk offsets in a softly-regulated world. As you can read about in any publication that believes climate change is real, the most high-certainty way to reduce atmospheric greenhouse gases is not pull the carbon out of the ground in the first place. How do you make a market for that? And how can it rely on good-enough quantification techniques? 

Optimistically, there is an opportunity for markets to do the work of coordinating people to incentivize environmental protection by finding something close to "true value" (whatever that means) of quantified ecosystem services off the landscape, and then holding people to paying that cost. Unfortunately, I'm pessimistic over the potential for markets to do coordination that serves society well, especially outside of well-enforced, responsive, and trustworthy regulatory environments.  Sure, markets allow for vast amounts of coordination without much communication, but because of the dollar-value tunnel vision, they optimize and coordinate towards monetary value rather than the meaningful externalities. There is plenty of critique to be leveled against Scott Alexander's well-known Meditations on Moloch essay, but I think the core nugget stands: that mass-level individual-actor miscoordination can lead to bad (Molochian) outcomes in a civilizational prisoner's dilemma. Microplastics in our drinking water, gasoline-dependent lifestyles, and of course global ecological collapse follow from us all proceeding as-normal, avoiding difficulty of organizing and changing collectively. Instead, most things pursue cash.  

I would like for carbon credits, payments for ecosystem services, natural asset registries, cap-and-trade systems, environmental taxes, etc—all of these schemes!—to lead to more of a conservation ethic, where the rich world finds ways to enjoy life without expansion of damage-causing consumptive patterns. I'm my mother's son, and she is a geographer, so I believe that the essential element to return to is land. Land is the ur-asset, both environmentally and financially. We have a finite amount of square footage on earth and we should prioritize stewarding it well. (I include the ocean when I use "land" here, really—any unit of area on the earth surface.) You can't destroy square footage, but you can effectively destroy its ecosystem function by, for example, paving over it, one of the purest ways of disconnecting an ecosystem from its context. And disconnection is death. I'm interested in ways to incentivize people to do this less: the development of a wider-scale land conservation ethic. 

There is one marketesque tool that touches this: enter Wetland Mitigation Banking. WMB is a legal mechanism in the United States that builds a market on which to exchange wetlands. It is not really a true market, acting more like a highly regulated and procedural exchange between a small number of players (around 400 wetland mitigation banks in the USA as of 2017) and land developers. The “market” for wetland bank credits is purely a construct of federal and state regulatory programs that restrict development in wetlands and mandate compensation in exchange for development. It is enforced by the EPA and US Army Corps of Engineers. The essence of WMB now is that wherever wetlands are destroyed, they must be created (or restored), working towards "no net loss" of wetlands, a mantra established in 1989 after the policy's inception—it was a product of the 1972 Clean Water Act. 

WMB has evolved over time to require "no net loss" not only represent total area, but also function of wetland (evaluated in a few ways), and that the destroyed/developed wetland and created/restored wetland be geographically proximate. Originally, exchanged wetlands were required to be in the same watershed; now, they can be further separated. A mitigation ratio is set in the exchange however, and it generally increases the required area of wetland to be created/restored if the "new" wetland is off the same site, outside of the watershed, or even further away. (i.e., you might be approved to destroy/develop 2 square kilometers of marsh if you restore/create 5 square kilometers of marsh 20km away.) This mitigation ratio can be cranked up to account in response to anticipated "losses due to lags" in restoration (BenDor 2009) or otherwise used as a kludge to help offset damages or adjust for different wetland functions. In WMB today, the parties controlling the developed/destroyed and created/restored wetlands are allowed to be different. A wetland mitigation "bank" is an entity that creates an array of wetland credits through marsh creation, restoration, and navigation of the legal procedures (including a broad inter-agency review team, IRT) required by WMB policy. The process typically takes 10-20 years which, as a wetland restoration researcher, I can say is a decent timeline to restore marshland in some functional capacity. Once the bank has these "mitigation credits" in-hand, they can be sold to developers, who need the credits to get approval by the U.S. Army Corps of Engineers to destroy/develop the wetlands. The wetlands are given million-dollar trusts as part of the arrangement, to, hopefully, pay for stewardship in perpetuity (Kirk Elliott, personal communication). 

Any time wetland credits are exchanged, some kind of equivalence is invoked. Claiming that "wetland X here is exchangeable with wetland Z there" is a bundle of interlinked assumptions and willful ignorance. Equivalently effective bird habitat? Equivalent above-ground shrub biomass and trajectory? Nitrogen fixation? Heavy metal burial rates? Accessibility for recreation? Hydrologic connection with the rest of the watershed? It's near-impossible to speak about any kind of precise equivalence of any two specific places on planet earth, despite all our tools for abstraction. We continue to treat things as fungible regardless, as that's what is required to make a market exchange happen. Some work by Cardozo & Kelty at UCLA helps explain how cultural history of a site, indigenous and not, further renders land unfungible because of its in-place cultural value. They explain some particular conditions where an oil company has pursued swapping wetland that they own (and degraded, seemingly) in exchange for nearby protected wetland where there is untapped oil, something akin to WMB but where the restoration has not yet happened. (This is actually another type of wetland mitigation, of which there are three—WMB, In-Lieu Fee, and Permittee Responsible Mitigation, but research supports WMB, where the restoration must be done prior to exchange, as the most ecologically successful.) The project is in Metro Los Angeles where oil drilling and wetland and sacred Tongva & Acjachemen lands comingle, and drilling is being circularly permitted in a "land swap":

" ... the oil company could simply profit from expanded oil drilling, where allowed, and not invest any money in ecological restoration of the wetlands they have already degraded–i.e. just move on and let them be. But a restoration project [...] provides an added incentive because [the oil company] can now take advantage of the [land swap and] mitigation system to generate revenue for restoration in the future. That is, under no existing legal regime could [the oil company], or its predecessors, be fined for the damage already done, nor expected to pay for what the damage caused by them or their predecessors. Rather [the oil company] can generate revenue and good will by using the mitigation system to support further drilling in exchange for fixing what they have already degraded. This is, not to put too fine a point on it, a kind of temporal pyramid scheme which designers of mitigation schemes probably did not intend. But it is a clear outcome of the fact that mitigation schemes are inherently future focused, not backwards looking: they privilege constraints on future action, not accountability for past actions. There are good reasons for this, to be sure, but as this story illustrates, there are also bad outcomes." 

This case is more complex than others due to the dense and layered nature of urbanization and liability in Southern California, but still demonstrates the messy nature of WMB when treated as a simple offset in a complex territory. The authors point out the future-focused nature of WMB, something that all ecosystem service markets (that I'm aware of) share: the need to create a new entity--a credit--in order to sell it, rather than supporting any kind of pay for reparations of prior damage. There's no money for the work until you enter the arena of the (pseudo)marketplace, and this hobbles our ability to protect wetlands outright, endangering mature wetlands in exchange for restored wetlands which typically perform worse in their services. 

WMB was established to discourage destruction of wetlands, and because it does this mostly via a financial mechanism, the high-margin actors can still essentially do as they wish. This has led to systemic shifts of wetlands from high-valued urban regions (where developers can charge rents) to low-cost rural lands where mitigation banks can restore acres for low prices (as documented by Ruhl & Salzman 2006 in Florida, with some more expansive work into the socioeconomic spatial effects of WMB by BenDor et al. 2008). Assessing these social spatial outcomes is a moral choice of how people should live in proximity to "natural" spaces, an interesting conversation but one I won't wade into further at this time. More important perhaps is that WMB itself is "at best, moderately successful" for biodiversity conservation and even in conservation of total acreage, due to failure of restored wetlands to properly replace those destroyed. Robertson repeats Cardozo & Kelty's sentiment, saying that "that the methods used for accounting for wetland loss and gain in current regulations may not prevent current wetland alterations from burdening future generations."  

I believe there are some opportunities and lessons in Wetland Mitigation Banking. While not a roaring success, the thing that draws me most towards WMB is that it seeks to incentivize protection of land with a broad brushstroke, without exploring too deeply the difficult-to-untangle bundle of ecosystem services any given acre supports. This (dull) tool helps avoid the fool's errand of precise quantification of messy, open-system environmental processes and prioritizes large, connected, geographically proximate parcels of land, which is good ecologically. Focusing on land exchange allows these systems to lean on sovereign systems of land ownership and avoid problems of "double-dipping" in ecosystem service markets. The mechanism of setting up trusts for ongoing stewardship represents a commitment to the long-term sustainability of the wetlands. But all of this requires relationships between regulatory bodies where these laws are navigable and enforceable, to be upheld on timelines relevant to ecological restoration. The regulatory and enforcement environment is WMB's biggest barrier towards the goal of wetland conservation. The second-biggest barrier is still one of assumed equivalence between different sites, especially a false "temporal equivalence" of a mature marsh to the hypothetical future of a marsh in restoration. Future amendments to the law may help avoid problems in both of these dimensions. If a wetland restoration project fails by some pre-determined metric in a pre-determined time frame, the permittee should be held to a new credit purchase or to allocate funds for continued restoration labor—or the conservation trust sizes should be increased to help pay for such. Mitigation ratios could be modified age of wetlands so as to make more difficult the swap of destruction of a (typically more high-functioning) mature wetland for a newer one without extensive scaling-up in area and function. If I could really embed my conservation ethic into WMB policy, I would ban entire categories of activity, such as oil extraction and parking lots, from eligibility for wetland credit purchases. Some literature bemoans how expensive wetland development becomes in a well-regulated WMB system, but I see this as exactly the point: we should be discouraging any further wetland destruction, and encouraging redevelopment and densification instead. I would also still like to imagine mechanisms that support funding marsh conservation without that conservation being in exchange for anything in particular, but I struggle to imagine how the pseudomarket can support anything like that: perhaps it is just the realm of classic conservation finance.



WMB is already so far from being a free market that I speculate introducing more rules will feel incremental rather than fundamental. It's difficult to anticipate though, as ecological, hydrological, legal, and social systems collide in messy assemblages upon the landscape. As Robertson says here, these projects are complex enough that their environmental and economic success hinges on the particular contingencies of place and time that underlie any given project. To this end, I'm thankful for the relative simplicity of WMB relative to other ecosystem service markets, and believe that its focus on land parcels, rather than unbundled individual service metrics, is promisingly in the direction of ecological function and conservation. Any collision of the imaginary abstraction of the economic market and the unfungible but tangible reality of the environment will be messy, but I support an effort to pour the money generated from this collision into more environmental protection. 

Sitting through inter-agency review,
Lukas


This essay was the 2nd of 3 that I've written with support from the Regen Foundation. I am not sure if I will publish the final one here in Gnamma as it is the most technical, on details and tools for carbon estimation in blue carbon systems. If not, I will share a link to it later. Thanks to Regen for their support and patience. Also thanks to Dr Bodie Cabiyo and Marta & Kirk Elliott for letting me interview them to learn more about these worlds of service equivalence and WMB. Thanks to my friends and colleagues Kelly Leilani Main, Caylee Hong, and Jasmine Martin—it has been fun discussing the myriad ways wetlands are perceived and instrumentalized via Berkeley's Social Science Matrix. And thank you to those who read and respond to what I'm writing, it means a lot.